A pioneering econometric computer

Invented in the late 1940s by talented New Zealand-born
economist Bill Phillips (1914-1975), the pioneering econometric computer on display
in the Reserve Bank Museum uses water quantities and flows to simulate the flow
of money through the economy.

New Zealand economist Bill Phillips invented the MONIAC in the late 1940s as a way
of demonstrating the macro economy to his students at the London School of Economics.
He built the prototype for around £400, including parts scavenged from a Lancaster
bomber.

The acronym MONIAC – 'Monetary National Income Analogue Computer' – was apparently
invented to echo the ENIAC digital computer then being developed in the United States.

By contrast with those machines the MONIAC operated wholly on analogue principles,
using water to simulate flows of money. Around 14 were built.

The MONIAC was capable of making complex calculations that could not be performed
by any other computer at the time. The linkages were based on Keynesian and classical
economic principles, with various tanks representing households, business, government,
exporting and importing sectors of the economy.

Water pumped around the system could be measured as income, spending and GDP. The
system was programmable, and experiments with fiscal policy, monetary policy and
exchange rates could be carried out.